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Japan’s Economic Downturn : Recession Alters Global Rankings

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Japan has unfortunately lost its third spot in world’s largest economy to Germany due to an unexpected recession. 

Once being the second largest economy in the world, Japan is known to have two consecutive quarters of contraction on Thursday which is falling 0.4% on an annualised basis in the fourth quarter after a revised 3.3% contraction in the third quarter.  Another prediction by the International Monetary Fund is that Japan is to fall to fourth place. 

Both Japan and Germany have built their economies through small and medium-sized businesses and as compared to Japan, Germany has reflected a positive economic foundation as there was a strong euro and inflation, unlike the weak yen which was another plus point for Germany. 

“Several years ago, Japan boasted a powerful auto sector, for instance. But with the advent of electric vehicles, even that advantage is shaken,” said Tetsuji Okazaki who is a professor of economics at the University of Tokyo who believes that Japan is definitely weakening and will have a lesser presence in the world. 

He also added that “The gap between developed countries and emerging nations is shrinking, with India certain to overtake Japan in nominal GDP in a few years.”

”This is a headwind for the BOJ,” according to Takeshi Minami who is an economist at Norinchukin Research. “I think there was a feeling that the BOJ will end the negative rate in March or April, but a north wind is now blowing.”

The weakening of yen is coming back to unseen levels since November, and following Thursday’s data release, Japan’s currency has remained stable which is hovering around 150.40 against the dollar. 

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